Second Mortgage Holders Increasingly Underwater

New York, NY, June 7, 2011 -- Nearly 40% of homeowners who took out second mortgages owe more than their homes are worth, more than twice the rate of owners who didn't take out such loans, according to a report by CoreLogic.

The report says 38% of borrowers who took cash out of their residences using home-equity loans are underwater, compared to 18% of borrowers who don't have these loans were underwater.

It's not clear how these funds were used but these kinds of loans account for about 10% of the U.S. mortgage market. Underwater second mortgages create a number of problems, making it more difficult to get everything from a credit card to a business loan.

According to Federal Reserve Board data, homeowners took out a total of $2.69 trillion from their homes at the height of the housing boom between 2004 and 2006.